Column: On monopolies

As usual, I think it is best to start the discussion of a topic by defining terms:

A “coercive monopoly is a business concern that prohibits competitors from entering the field, with the natural result being that the firm is able to make pricing and production decisions independent of competitive forces.” (Wikipedia)

Historical examples include the British East India Company, which had a monopoly on tea trade (this later helped fuel the American Revolution) and the First Bank of the United States, which had a monopoly on issuing money (now the Fed effectively does the same thing).

Coercive monopolies created by the government still exist today in areas such as mail (USPS), roads and utilities.

It has been suggested, often in order to criticize capitalism, that free markets lead to coercive monopolies. This is false, and can be demonstrated both in principle and historically.

In principle, it is impossible, because in a laissez-faire capitalist society there are no government subsidies or monopolies, and so competition is never truly impossible.

Even if competing with certain businesses might be very difficult, potential competition always exists because even monopolies have limits on how high their prices can be before they lose profits and encourage others to enter the market.

Moreover, goods and services can always be substituted by other goods or services when consumers deem it economically preferable; for instance, if gas makes driving too expensive, people use buses or other forms of transport.

Historically, capitalism never created monopolies. Even in the late 1800s, when Rockefeller controlled almost all of the oil industry in the United States, prices of oil steadily decreased in order to fight competition (with the result that consumers greatly benefited). Similarly, Microsoft, which was accused of being a monopoly a century later, had to sell its products very cheaply to maximize profits and defeat its competitors.

If this is true, why have big businesses been disparaged so often, both in popular media and in the political discourse? And why do we have anti-trust legislation?

There are surely many factors involved. And to the extent that distrust of businesses is due to some businesses having improper political ties, this is justified.

One main reason, though, is that people have almost always rejected the notion that it is moral for people to primarily pursue their profit and self-interest in general. Even today, businesses are primarily thought of as ways to provide jobs for people, not means by which individuals legitimately pursue the goal of creating and acquiring wealth.

We should revise this attitude. In a free society, where businesses do not and cannot rely on subsidies or special government favors, one can only be financially successful by providing products and services that people enjoy and view as worth buying.

Even Microsoft, with all its power, could not make the Zune desirable enough to compete with Apple’s iPod.

There should be no guarantee for smaller businesses to compete successfully against larger businesses — to the extent that larger businesses act irrationally or are unpopular, though, competition will be made easier.

Fear of monopolies in a laissez-faire capitalist society is illogical, historically unfounded and based on unjust evaluations of businesspeople.

It is time that we change our attitudes toward these individuals and view them not as our enemies, but as our liberators.

As Ayn Rand once wrote, “in the short span of a century and a half, [the businessperson] has released men from bondage to their physical needs, has released them from the terrible drudgery of an 18-hour workday of manual labor for their barest subsistence, has released them from famines, from pestilences, from the stagnant hopelessness and terror in which most of mankind had lived in all the pre-capitalist centuries — and in which most of it still lives, in non-capitalist countries.” (For the New Intellectual, 27)

If you want to compete with TRISTAN DE LIÈGE’s monopoly on the use of Ayn Rand quotes, contact him at tflenaerts@ucdavis.edu.

5 Comments on this Post

ttime09

“More bullshit from Ayn Rand? See monopolists as our liberators? You’ve got to be kidding me? And I’m sure you think there’s only keynesians and capitalists. Sigh, the sad state of American economic though just keeps getting worse as people like you show that youth is being indoctrinated with a host or irrational beliefs.”

No, I do not think there are only Keynesians and capitalists. In fact many people are neither totally in favor of statism nor totally in favor of freedom (not to say Keynesians are in favor of total statism). And do you have an argument to show why Objectivism is irrational?

“Ayn Rand is neither objective, nor is she rational. She escaped Russia because she didn’t like the government taking her stuff, which her family had too much of by the way.”

If you want to believe that about Ayn Rand, that’s fine (not sure what you mean by ‘too much’). In any case, this has nothing to do with the quality of her ideas.

“That’s what oligarchy leads you too. And then when she comes to America the Koch brothers tell her “hey Annie? there’s these really good programs called social security and medicare. Use them so you can live.” Lo and behold she says “yes, your majesty.” What a hypocrite? The notion that beliefs about a completely unfettered market are beyond me because they have proven time and again how baseless and foolish they are. ”

That doesn’t make her hypocritical, since she paid into those programs – she was justly tacking back some of the money that had been taken from her by force. I don’t think completely unfettered markets have been proven baseless and foolish ever, much less time and again. In fact, I think the historical case is on the side of capitalism.

“I feel sorry for you. I bet you’re a nice person but these kinds of beliefs don’t suit you man.”

Please, save your sympathy. I don’t want it.

Tristan de Liege

mertinburl

If Ayn Rand really disliked the state then why would she use government programs like Social Security and Medicare? By using the programs most representative of the philosophy she seeks to discredit she is not a strong follower of her own philosophy. More simply: she is a hypocrite. And she’s kind of a big leech on the public, something you and her don’t believe in, because she didn’t believe the science on smoking showing that it can basically kill you was true. So she first uses programs that she’s supposed to hate and then she continues engaging in an activity that that increases Medicare’s costs for her significantly. How is this not being a hypocrite? And the fact that she paid into the system is completely irrelevant to justifying her using these programs because it is a matter of principle we’re talking about, not contributions. By using these programs and justifying their use based on the defence that she paid into them Rand becomes less of a philosopher and more of an opportunist…. or the two things could be the same in her case. There are many people who pay into these programs and don’t use them when they could but by doing so Rand is simply a petty leech. Wow, and by force. Because she was fighting the man when they took this money from her right? Haha, give me a brek.

Define freedom.

WOW! “In fact, I think the historical case is on the side of capitalism. You think but you don’t know. Just look at South Korea, Japan, China and see how their development was very much government guided. Even the United States has provided many examples of government involvement to create prosperity and freedom. Freedom is not an individual activity, it’s a collective action. No market can produce the freedom a capitalist lies about having in their system because the fundamental task of a free-market is not to provide freedom but to create profits. Geez, the whole slavery of millions of Africans and Latin Americans was pretty much about capitalism. And the era of big business in the early 1900s saw the use of child labor and 14 hour work days. How are those kinds of things “freedom”? And these were during the heyday of capitalism. It seems like capitalism is not the definition you’ve given in another response but actually something different from what it was thought to be.

And by too much I just was trolling you. You’re so bent on these ideas that terms like that would set you off. LOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOL. DERP.

From your response you sound like a person whose been a spoiled brat all their life and who’s been endowed with many gifts that you can’t see why these programs can be useful. When you lose a job as an older person see that these programs are useful?

Oh, and don’t care for my sympathy! Well let me tell you that our lord Jesus Christ has place for people like you, the misguided. And as one of his followers it’s my duty to show you sympathy and compassion. Tristan my son, I may disagree with you but you are still one of god’s children so I wish you the best and hope you pursue your endeavors successfully and happily. Also, I think you’re cute.

mertinburl

More bullshit from Ayn Rand? See monopolists as our liberators? You’ve got to be kidding me? And I’m sure you think there’s only keynesians and capitalists. Sigh, the sad state of American economic though just keeps getting worse as people like you show that youth is being indoctrinated with a host or irrational beliefs. Ayn Rand is neither objective, nor is she rational. She escaped Russia because she didn’t like the government taking her stuff, which her family had too much of by the way. That’s what oligarchy leads you too. And then when she comes to America the Koch brothers tell her “hey Annie? there’s these really good programs called social security and medicare. Use them so you can live.” Lo and behold she says “yes, your majesty.” What a hypocrite? The notion that beliefs about a completely unfettered market are beyond me because they have proven time and again how baseless and foolish they are. I feel sorry for you. I bet you’re a nice person but these kinds of beliefs don’t suit you man.